Monday, December 29, 2008

Regulatory Cacophony

One of the goals of The Technological Liberation Front is to reverse the perceived dangerous trend in over-regulation. This is an admirable goal that everyone, even me, could agree with. While the majority of posters call for less regulation to foster the free market system; there is also a whisper that our country needs to take a "strong stance" to protect so-called intellectual property.

Adam Thierer expresses the viewpoint of most posters with: "One of the reasons that so many of us here take issue with proposals to expand regulation of communications, broadband, and media markets is because we have studied the horrendous inefficiencies of economic regulation in practice. We oppose regulatory proposals not because of a “blind faith” in free markets, but because we understand that even when markets stumble they correct themselves quicker and more efficiently than regulatory systems do."

But then when the necessity to protect so-called intellectual property is raised there are vague references to undefined entities obligated to protect so-called intellectual property. Drew Clark writes: "Nations ranging from Brazil to Brunei to Russia are failing to properly protect the intellectual property assets of US companies and others, and international organisations are not doing enough to stop it, seven IP attach├ęs to the US Foreign and Commercial Service lamented recently." (emphasis added). Reading between the lines this is a clear call for greater regulatory involvement by government, not less.

For example the US Chamber of Commerce (as Drew writes) has provided some clarity by calling for the appointment of: " “a well-qualified undersecretary and director” - with a nine-point list of job qualifications - and also to “enhance organisational management” and “improve the retention of patent examiners.” This has the look, feel, and smell of regulation.

Essentially we are left with a logical disconnect concerning the concept of regulation. Certain agencies such as the Federal Communication Commission and the Federal Trade Commission are routinely villified as "bad" because they regulate business in the name of the Public Interest but then we do a conceptual 180 deggree turn when a "good" government regulatory agency is needed as a private police force for the benefit of business. In recognition of this trend, TechDirt writes "Senate Wants to Send US Copyright Cops to Foreign Countries".

In conclusion, the goal of deregulation is being usurped by a call for more special interest regulation to protect businessess. Regulation, should be for the creation of a "level free-market playing field" not as a means of favoring special corporate interests. Essentially, we are seeing the emergence of Corporatism. Under Corporatism the government is essentially reduced to being a lacky of corporate interests. A nation of, by, and for the corporation.

Wednesday, December 24, 2008

On Regulation

Our financial system is imploding. As a crowning insult we have the Bernie Madoff ponzi scheme. These unprecedented market failures naturally raise the issue of the interrelationship of the free market and regulation. Before going further Larry Kudlow discussed (video) "Regulation Overhaul" on CNBC. If you listen, you will actually here Larry (a free market anti-regulatory advocate) say that deregulation is not the answer since we need the rule-of-law for financial stability with Steve Moore responding "Geez I never thought I would see the day Larry were you would trounce the Wall Street Journal"!!! (Quote more or less accurate)

Back to developing the theme of this post. In the face of this financial debacle the call of many free market advocates has been for less regulation! Mimicking this call, Tim Lee wrote "Real Regulators" at the Technological Liberation Front, in regards to net neutrality, "Too many advocates of regulation seem to have never considered the possibility that the FCC bureaucrats in charge of making these decisions at any point in time might be lazy, incompetent, technically confused, or biased in favor of industry incumbents." What is bothersome is that Tim's comment is a sample representative of the blind repetition of a tired dogma that refuses to really examine why a free market failure occurred. The whine is that it always the fault of regulation. This is not a demonstration of the rationale thinking that our free market is supposedly founded upon.

In my response to Tim's post I wrote:
Usually, the claim is made that the consumer will quickly discover the abuse and that market pressures will reign in companies so that they will once again operate within the idyllic principles of the free market. The anecdotal evidence unfortunately is that this is a naive and utopian concept. The Madoff affair scheme has evidently gone on for decades and the automotive industry has been failing for decades. In fact, the automotive corporate executive have apparently been operating their companies in an "incompetent, technically confused" manner. Now, in the "best" traditions of the free market, these corporate executives are now groveling to the government to bail them out of their incompetence. So the executives of our automotive and financial industries who have claimed to operate on free market principles, instead of accepting responsibility for their failed actions now want socialism.
Those who always seek less regulation should take a long hard look in the mirror. True, regulations can be implemented badly, the regulators may be dishonest, they may not truly understand what they are regulating. The existence or non-existence of regulation does not cause anyone to behave badly. The corporate executives who have brought our economy down did it in a purposeful and willful manner. It is time that the finger of blame be pointed at them.

Not only should the finger of blame be pointed at them, but they need to realize that if we are to live in a civil society that they need to have a degree of social responsibility. The Madoff affair is a prime example of what happens when one can avoid regulation and is not constrained by social responsibility. Those who mindless whine about regulation need undertake some deep soul searching self-criticism.

Tuesday, December 16, 2008

Great Net Neutrality Debate II

Evidently a Wall Street Journal article sparked a variety of posts related to Network Neutrality. One post was at the Technology Liberation: "Front, Bandwidth, Storewidth, and Net Neutrality", which in turn referenced the testimony of George Gilder before the Senate Commerce Committee in April 2004. What intrigued me with the narrative, was the following narrative.

Although American companies invented almost all the technologies crucial to the Internet, we have fallen behind many other nations in the deployment of these technologies.

The U.S. now ranks eleventh internationally in residential "broadband" access. Using the FCC’s silly 200-kilobit-per-second definition, some now say that 25 percent of American homes have broadband. But by the standards of Asia–where most citizens enjoy access speeds 10 times faster than our fastest links–U.S. residences have no broadband at all. U.S. businesses have far less broadband than South Korean residences. South Korea, for instance, has 40 times the per capita bandwidth of the U.S. Japan is close behind Korea, and countries from China to Italy are removing obstacles to the deployment of vDSL, fiber-to-the-home, and broadband wireless networks.

Asian broadband also proves there was no Internet "bubble." Today, Korea runs over the net between a three and five times larger share of its economy than we do. Riding the bus to work, Koreans watch television news and exchange video mail over their mobile phones. They enjoy full-motion video education and entertainment in their homes. Many of the dot-coms that failed in America due to the lack of robust broadband links are thriving in Korea. Consider that by this time next year Verizon Wireless’s 38 million customers will enjoy faster Internet access via their mobile phones than through their Verizon DSL connections to their homes. Only the most severe disincentives to invest could have yielded such a result, which defies the laws of physics. The American Internet "bubble" was actually a crisis of policy.
The purpose of
George Gilder testimony was to establish how America is falling behind due to "oppressive" regulation. The problem with the narrative is that it is logically flawed since Mr. Gilder has not delved into why the Asian internet is better than the US internet. One can't simply say that regulation in the US has made our internet "bad" when compared to the Asian internet. For all I know, the Asian internet could be even more regulated than the US internet. Or they have better network managers than we do? Mr. Gilder has simply overlooked these potential reasons.

The narrative, to me, is logically flawed in another manner. If the technology exists, it can be deployed. If it is not deployed then the corporate leaders have made a willing choice not to use it. I would say this is similar to regulations imposing automobile emission standards. The US auto industry said it couldn't be done and whined to Congress. The Japaneses called in their engineers and did it. Now, because they have failed to adapt the American automotive industry is facing bankruptcy.

If the Asian internet is better then the US internet, we need to examine what they are doing and then adapt that technology so that we will have a better internet. Effective corporate leadership means adapting, not whining to Congress for special breaks such as bailouts or less regulation. If our corporate leaders talk free market principles, they should live it through competition.

I also provided this comment at the Technology Liberation Front.

Two Quickie Comments

Against Monopoly has posted a Tom Toles cartoon which exactly expresses my feelings on how we are "solving" our credit crises. We have to create more credit so that people can once again buy products that they are not able to pay for.

In typical corporate fashion, General Electric has issued a disingenuous press release. The press release states: "The Company also announced that it will no longer provide specific quarterly EPS guidance. Instead, the Company will provide a full-year operating framework with detail in the industrial and financial businesses. The Company remains committed to high levels of disclosure and transparency, and will continue to report all of its quarterly segment details." So GE is committed to operating in a transparent manner by not disclosing anticipated earnings information.

Saturday, December 6, 2008

Hollywood Remakes Science Fiction Classics II

So if Hollywood should be making "new" movies instead of re-hashing "old" content, the question naturally arises as to what stories are "ripe" for being made into a movie(s). Below are some suggestions. Each of these series consists of 3 or more books (except for Smith), so Hollywood should be able to get a log of mileage out of them.

1. C.J. Cherryh - Downbelow Series.

2. Jack Chalker - Well World Series and Soul Rider Series.

3. Jack Vance - The Dying Earth Series, The Demon Princes Series, Alastor Series

4. A. Bertram Chandler - The Rim World Series

5. Cordwainer Smith - The Rediscovery of Man

Several years ago, I did attend a discussion where Orson Scott Card talked about the studios wanting to make Ender's Game into a movie. Evidently that fell through due to artistic differences. Card believed that the changes proposed by Hollywood would diminish his story. Clearly we need to protect the integrity of any stories that are brought the big screen.

As an aside, Jack Vance should receive the Noble prize for literature.

Any more suggestions?

Friday, December 5, 2008

Hollywood Remakes Science Fiction Classics

The Los Angeles Times has several articles on Science Fiction. One of the features is a photo gallery of "13 upcoming remakes of Hollywood sci-fi classics". The purpose of Hollywood of course is to provide entertainment. Remakes of popular movies may be sure fire hits. But I have a question, why are remakes being made instead of making movies based on stories that have not been filmed?

Of course, that does not mean that new content is not being produced. As I was writing this a commercial came on the TV regarding the Chronicles of Narninia: Prince Caspian.

Could copyright have anything do with the lack of written content moving to film? That licensing a written story for movie production is now too complex and expensive? I don't know. This is pure speculation on my part, but I would think that Hollywood would be craving new content rather than recycling old content.

Any thoughts?

Tuesday, December 2, 2008

Imaginary Property Rights

For the past several years I have been following the debate on so-called intellectual property on the Gripe Line (now silent), Technological Liberation Front, TechDirt, and Against Monopoly. As I have read the posts a comon theme began to appear. The concept of "Sale" is being depreciated.

Normally when one buys a product, such as a car, the seller transfers his/her property right to the buyer. However, with the growth of personal computers which allows content to be easily copied and transferred, we have seen the emergence of so-called intellectual property. Those who support the concept of intellectual property assert that the creators of content perpetually own the content and that those who "buy" the content are simply "leasing" or "licensing" the content, which leaves the buyer with no property rights concerning how the content may be used.

The current trend of property rights aggrandizement by those promoting s0-called intellectual property rights appears to be coming under increased scrutiny. Ubersoft recently ran a very humerus panel of cartoons: "Grand Unified Interconnected Litigation Theory". This series of cartoons explores how end user license agreements (EULA) essentially strip the consumer of any rights and allows the content creators to essentially abuse the consumer at the content creators whim.

TechDirt recently published "Creation Does Not Equal Ownership". The article details that the simple act of creation does not confer perpetual ownership to the creator. In that article Mike Masnick wrote, more eloquently than I, "Despite their claims of being property rights supporters, they are actually the opposite. They are trying to deny property rights to any recipient."

"Creation Does Not Equal Ownership" is a followup an article by Stephen Kinsella: "Objectivists on the PRO-IP Act". Kinsella writes "Notes Johnson, "the creator of a piece of intellectual property owns the product of his work." His argument? "If a baker bakes a loaf of bread, he therefore owns it." And likewise, for "music, movies, software." But note the mistake here Johson makes: "If a baker bakes a loaf of bread, he therefore owns it." The "therefore" is the giveaway: he says this because he thinks of the creation of the loaf as the act that gives rise to ownership. Then this leads to the analogy with other created things, like music. But creation of the loaf is not the reason why the baker owns it. He owns the loaf because he owned the dough that he baked. He already owned the dough, before any act of "creation"--before he transformed it with his labor. If he owned the dough, then he owns whatever he transforms his property into; the act of creation is an act of transformation that does not generate any new property rights. So creation is not necessary for him to own the resulting baked bread. Likewise, if he used someone else's dough--say, his employer's--then he does not own the loaf, but the owner of the dough does. So creation is not sufficient for ownership."

Mike Masnick goes on to write: "Exactly. Creation alone does not grant property rights if none existed prior to that transformation. I would even take the argument a step further. Even if you own something due to the fact that you created it, once you have given away or sold that product, you no longer have ownership of it -- and claiming you do actually removes property rights from the lawful owner."

Those who advocate so-called intellectual property are attempting to deprive the consumer of being able to acquire property rights to products that they have legally bought. Furthermore, those who advocate so called intellectual property are asserting an imaginary property right that they do not even posses. It is time for the consumer defend their property rights by fighting back.

Monday, November 24, 2008

Stupid Economic Punditry-

Last night (11/23/2008) Fox News was on in the background. The anchor asked Jonathan Hoenig a question concerning taxes and the economy. My ears perked up and I went over to listen. Johnathan responded that that those who earn less than $XXX should not get a tax break as that would promote consumerism, which is what got us into this financial mess. OK so far.

He then went on to say that those who earn more than $XXX should get a tax break as an incentive to create jobs. At this point my jaw dropped in surprise. Economically, there is no difference.

If you give the "poor" a tax break they have money to go out an buy stuff. The "rich" seeing this demand for products hire more people to produce more.

If you give the "rich" a tax break to create more jobs, they hire the "poor" and begin to manufacture more. The "poor" now have more money to buy stuff. So we are back to the consumerism that created the economic meltdown.

Giving tax incentives, especially to the "rich" also ignores a couple economic principals. First, we are supposed to be a capitalistic system. The simplistic mantra of many of our economic pundits is "keep the government out of the private economy". Tax incentives means that the government is involved in the economy. If the mantra of "keep the government out" means anything, then no tax incentives. Furthermore, why would the "rich" need an incentive? If they see an opportunity, as an entrepreneur, they take the risk of investing. Isn't that what capitalism is about?

Paying taxes is not a "black hole". When individuals pay taxes the taxes are used to fund programs for the benefit of society, such as roads. If taxes are reduced then funding for many programs funded by tax dollars decreases. I'll end the tax issue here, otherwise this post will become too long.

Many economic pundits claim that the "rich" need tax incentives to "create" jobs. My viewpoint is that this is backwards. Jobs are created when the consumer has unmet demand for a product and the "rich" seeing that demand hire more workers. After all why would a "rich" person hire someone to produce something if there is no known demand for that product? Capitalism is not a welfare system. The argument that tax incentives are needed distorts the economy and simply becomes "corporate welfare".

Saturday, November 22, 2008

Kudos to the Washington Post

Rob Pegoraro writes in the Washington Post: "Apple's DRM Breaks MacBook Movie-Download Viewing" Rob exposes the flaws of DRM to his readers. Specifically that DRM adds no value to the consumer and, in fact, deprives the consumer of his/her ability to use their legally bought products.

The Post has been one of the better papers when it comes to holistically reporting on a product. Too many papers, including computer magazines, only seem to regurgitate a corporate press release touting all the new bells and whistles of a product conviently ignoring the downside issues. The consumer needs to be fully informed. Thanks Rob!
Updated 11/25/2008: Here is an article from the Electronic Frontier Foundation "Apple Downgrades Macbook Video with DRM". Fred Von Lohmann also wrote "When you buy DRMd content, the vendor can snatch your investment from you at anytime."

The Great Net Neutrality Debate

The internet has become an indispensable tool for most of us. Our ability to use the internet depends on the transmission of data packets. How those data packets are transmitted through the internet cloud has become a matter of controversy. Here is a sampling from The Technological Liberation Front. Here is a sampling from TechDirt and here. The controversy revolves around the issue of whether the transmission of data packets should or should not be regulated by the government.

Sounds simple, but it is far from simple. Those who advocate that net neutrality should not be subject to government regulation assert that it is a private network and not subject to government oversight. Furthermore, the argument is made that if an internet service provider (ISP) attempts to break net neutrality concepts that the ISP will punished by the market and would be forced go back to a net neutrality operating concept. Given our free-market orientation this appears to be exactly what we would want.

Unfortunately, the utopian free-market concept of net neutrality crashes in the face of reality. The private market simply can not be trusted to implement a neutral internet from the consumers perspective.

First, those who vehemently argue against government regulation speak of all the problems that government regulation of the internet may create. The problem is that those who do not want regulation refuse with equal vehemence to offer the public any guarantees that they would operate under the principle of network neutrality. They state that if a network neutrality concern surfaces, the market will magically punish the abuser thereby restoring the operation of network neutrality.

This theoretical self-correction sounds reasonable but it breaks down in the face of reality. The average person does not have the equipment and technical expertise to monitor the internet. Companies, if discovered, can easily say "OOPS, sorry about that" and then try another abusive tactic. So if the ISP are unwilling to stand-up and offer the public reasonable guarantees of network neutrality, why should we trust them. "The check is in the mail."

Second, the argument is made that the ISPs would have little incentive to interfere with the movement of packets on the internet. This is bunk.

However, before I go further there are times when an ISP has legitimate technical reasons for managing packet flows on the internet. My comments pertain to when an ISP interferes with packet flows for ulterior reasons unrelated to technical issues.

Richard Bennett commented that: "In general, arguments that service providers can't do this or that as a practical matter are founded on sand. Advances in technology make many things practical tomorrow that are utterly impossible today, and we can more or less expect that to happen." This observation is reflected in reality. (Please note that Richard Bennett would, more than likely not agree with my statements below.)
  • In the ideal situation where the ISP is just providing the "pipe" there is no economic incentive to filter. However, when telecoms (as one example) are part of the network flow, there are significant economic incentives to filter. Sues AT&T For Blocked Phone Calls.
  • Then there is the corporate intimidation tactic: Movie Studios Sue Australian ISP For Not Waving Magic Wand And Defeating Piracy
  • We are now living in a world where special interest groups are demanding that laws be passed to force ISPs to break network neutrality concepts.
    RIAA Gets Tennessee Law To Force Universities To Filter Networks For Copyrighted Content
  • As a follow-up to the special interest groups gaining favorable legislation is the concern that private companies are now obtaining governmental police powers. This would essentially allow private companies to censor the internet at their whim. This is not an idle concern. Harvard Law Professor Charles R. Nesson, stated "This is an unconstitutional delegation by Congress of executive prosecutorial powers to private hands," says Nesson. "That a private organization is allowed to take a huge chunk of government power and impose its will upon millions of people is, frankly, disconcerting,"
  • This may seem outlandish, but then we are in a free market economic system, so it may be possible for the likes of the RIAA or the MPAA to pay the ISPs to spy on internet traffic for the purpose of uncovering the theft of so-called intellectual property. Essentially, private enterprise (in the name of protecting their so-called property rights) believes that they would have the right to read your private "mail" (packet) without your permission.
Those who oppose network neutrality regulation make lofty utopian assertions that the invisible hand of the free market will protect the concept of a neutral internet. The reality is that there are a lot of issues that would frustrate the operation of a neutral internet if they are not resolved. Those opposed to network neutrality are unwilling to make guarantees that if they were in a position of power that they would operate the internet in a neutral manner. If they are unwilling to step up to the plate and take responsibility, the consumer is free to seek regulation that will protect their ability to surf the internet in a fair neutral manner. After all, it is the consumer who pays the ISPs to provide this service.

Thursday, November 6, 2008

Obama Backpedaling ??????

Well it only took the New York Times one day to run a post-election article: "Obama Aides Tamp Down Expectations". The Times is blatantly for Obama so the question naturally arises was this article a legitimate news story OR was it a planted story by the Obama camp to lay a foundation for a future media blitz to diminish the promises made during the campaign.

One story, by itself does, not prove that this story was planted. Nevertheless politicians are not noted for being up-front when it comes to campaign promises. Once elected, campaign promises become a political liability. A political savvy person would never acknowledge that they purposely made promises that they had no intention of keeping just to get elected. Instead they would initiate, post election, a media campaign that would "document" the complexities of the "problem" and that after careful "consideration" would require a revision of the campaign promises to reflect "reality". The movie Wag the Dog (Wikipedia) comes to mind as a humerus example of how this manipulative process works to shape public opinion. Clearly it is to the benefit of the Obama camp to recharacterize campaign promises as hopeful goals rather than as real concrete commitments.

Is this story a tentative initiation of a future media campaign to diminish Obama's campaign promises? I don't know. Only time will tell.
Updated 11/9/2008: The Washington Post ran an article "Can He Do It?" The Post writes: "During the long election campaign, Sen. Barack Obama promised many things to many taxpayers, investors and homeowners. When he first announced some of his proposals, the economy and the federal budget looked vastly different." (Emphasis added). "What probably has to give is swift action on the myriad tax cuts that candidate Obama laid out on the stump, analysts said. " ... "William Gale, director of economic studies at the Brookings Institution. "Remember, the plans were created at a time when we weren't in this situation. Something has to give. Significant flexibility is required." " (Empahis added)

There is no doubt that priorities have to change in the face of a worsening economy. Neverless, like the New York Times article; is this article a legitimate exploration of the difficulties to be faced in implementing the campaign promisess or is it a forunner of the pro-Obama media to initiate a crusade to diminish Obama's campaign promises?

Wednesday, October 22, 2008

Sprint Bad

New York Times article "Credit Squeeze Adds to Sprint’s Challenges". While the credit squeeze may be exacerbating Sprint's problems, its too bad that articles such as this don't delve into why Sprint is in bad shape. In short bad customer service. And the customers are leaving. The Times wrote: "John Hodulik, an analyst at UBS Investment Bank, said he expected Sprint to report the defection of 1.1 million customers in the third quarter, one of its largest losses ever."

I won't go into the details, but we were treated very badly by Sprint. So we left. Too bad that Sprint's management is not being held accountable for destroying the company. Seems that our corporate managers, witness our financial meltdown, have little accountability for mismanagement. It boils down to: No customers, no income, then out of business. To stop this decline, Sprint should be publicly apologizing to its current and former customers and offering to make nice. Probably won't happen since management will collect their bonuses anyway, even if the company goes bankrupt. I won't hold my breath for any apology from Sprint.
Updated 2/20/2009: The New York Times reports that: "For Sprint Nextel, a Drop in Customers and Earnings". According to the Times: "Sprint Nextel reported on Thursday that 1.3 million subscribers dropped its wireless service in the fourth quarter, contributing to a 14 percent decline in revenue. ... the nation’s third-largest wireless carrier, lost 4.5 million customers during 2008 to end the year with 49.3 million."
Updated 11/7/2008 : The New York Times reports that: "Sprint Nextel Lost 1.3 Million Customers in Quarter ". That's just over 14,000 customers a day!!!!

NY Times writes: "Revenue fell to $8.81 billion from $10.04 billion a year ago." "Sprint reported a net loss of $326 million, or 11 cents a share, compared with a profit of $64 million, or 2 cents, in the quarter a year ago."

Sunday, October 19, 2008

AACS Challange

Advanced Access Content System (AACS) is an encryption technology for HD DVD and Blu-Ray Discs. The purpose of this technology is to restrict the ability of the consumer to copy the content and to allow the disk manufactures to control the use of the digital media. Since the purpose of this technology is to limit the consumer; how is it a benefit to the consumer?

website lists consumer "benefits". Among the so-called benefits: 1) A superior viewing experience, 2) Greater flexibility in managing the content, 3) Enabling groundbreaking home entertainment choices, and 4) Platform independence.

I fail to see how the use of an encryption technology can provide any of those "benefits". The whole purpose for using an encryption technology is to enhance the ability of the content creator to limit consumer control. For example, one can have a superior viewing experience without the use of this technology. In fact this technology has the capability to degrade your viewing experience if it does not like the disk that you are using. Ed Felten at Freedom to Tinker wrote: "My lab, for example, has an HD-DVD drive and some discs, which we have used for research purposes. But as far as I know, none of the computer monitors we own are AACS-approved, so we have no way to watch our lawfully purchased HD-DVDs on our lawfully purchased equipment." Furthermore, with an unencrypted disk one can directly access the data and manage the content. The assertion by AACS that the consumer will benefit is Orwellian Newspeak. A shameful abuse of the English language and a disingenuous marketing practice.

My challenge, will AACS provide real concrete examples of consumer "benefits".

Updated: 10/24/2008

Copyright Relativity

An overlooked aspect in the copyright debate is that those who advocate so-called "strong" copyright laws are actually aggrandizing the property rights of those who hold a copyright by diminishing the property rights of the consumer. Previously legal uses of a copyrighted product by the consumer are increasingly being made illegal. The property rights of the consumer to use copyrighted material must be protected.

We are in this predicament today because the public does not have an advocate to protect their property interests. Our political leaders, instead of protecting the public interest have become lackeys of Walt Disney, the Motion Picture Producers Association (MPAA), and the Recording Industry Association of America (RIAA). Wikipedia has a nifty graph and article that show how copyright has expanded over the years. Tom Bell also has reviewed how copyright has expanded.

Unfortunately, the corporate spin doctors have successfully characterized the need for "strong" copyright legislation as a method of assuring that content producers are compensated for their work. Clearly this argument has allure. No one wants to deprive the content producers of an income from their work. The logical flaw with promoting "strong" copyright legislation is that it is depriving the content user of reasonable use of the content that the user has bought. The consumer in buying the content also has a significant monetary investment that needs to be protected.

For example, if I buy a book we have well established rights to read the book in the US in Europe, or in Asia; we can read the book at any time; and when we are done with the book we can sell the book. However, the content industry has increasingly tilted the playing field to disable the consumers freedom to use content. For example, DVD disks and players contain region codes so that a DVD coded for the US will not play in Europe. The content industry has attempted to prevent time shifting, the ability of the consumer to save and view content when the consumer wishes versus the time it is offered by the content industry. Finally, the content industry is now asserting that content is never actually sold, but is merely leased/licensed, which has the effect of eliminating the consumers rights in how the product may be used. Ubersoft has a great cartoon series on how End User License Agreements strip the consumer of any legal rights to a product: Grand Unified Interconnected Litigation Theory.

One can make the arguement that the trend in "stronger" copyright law is actually eliminating the concept that products are actually "sold". Many of the products we "buy" (license), such as music and games are tied to Digital Rights Management (DRM) servers. Several stories have recently surfaced that if these servers go down, your entire investment in these products vaporizes. Even Apple has been identified as having a kill switch on their iPhone. With the current trend in how the content industry is attempting to define copyright law, protecting your investment becomes a criminal act. This brings us back to the point that the consumer, by purchasing copyrighted contents, should have rights to use that content. Further, like the content producer the consumer also has significant monetary investment that must be protected. The content industry should not have a unilateral right to whimsically cancel content as they see fit.

From the standpoint of relativity, it is unfortunate that the public debate on "stronger" copyright law avoids the consumer's property right as being equal to that of the content producer. Hopefully, the consumer's property right to use content and the consumer's monetary investment will become recognized.

Sunday, October 12, 2008

Afghanistan a Potential Quagmire

Afghanistan has quietly crept into the news with little reaction. There are two major concerns that should be explored.

First, in the last presidential debate October 7, 2008, Obama, made vigorous statements about pulling out of Iraq but then made commitments to increase our presence in Afghanistan. I find it surprising that the media has apparently not picked-up on this dichotomy.

I suspect that Obama's statement to increase our presence in Afghanistan was made so he could look tough without appearing to contradict what he has been saying about Iraq. Assuming that he wins the election, I would suspect that he would conveniently "reassess" the situation and conclude that we shouldn't be there. I don't know if Obama is really saying what he means.

Second, Articles on Afghanistan have recently appeared in the Washington Post and the New York Times. What these articles and others point to is an increased American presence and a change in focus for our involvement in Afghanistan. So far we have been very fortunate in Afghanistan by focusing on fighting terrorists we have avoided the issue of being conquerors. Both the British and the then USSR failed in Afghanistan because they attempted to conquer the country. By broadening our efforts in Afghanistan to include a war against drugs we will change the perception of the people of Afghanistan as to why we are there. The US will no longer be viewed as "person A" resolving a dispute with "person B" but as a conqueror who will attempt to change the Afgan way of life, even if we may not agree with it. When that happens a large portion of the Afgan people will react unfavorably to the US presence.

Concluding thoughts, both Iraq and Afghanistan raise a strategic concern that the US may not properly have considered. A war against terrorists cannot be won by holding territory. Incidents of terrorism can pop-up anywhere and at anytime. Though not attributed to terrorism Somali Pirate have seized ships off Somalia and we haven't done much about it yet. Nation building in Iraq can help, but it will take time. In the meantime we need the ability to have a rapid response force dedicated to hunting down the terrorists, wherever they may be. The Israeli's seem to have a pretty good model for us to emulate.

Disclaimer: My commentary is based on reading the newspapers (second hand info) so they should not be considered authoritative in any manner.

Thursday, September 25, 2008

What Went Wrong? – The Only Explanation You’ll Ever Need To Read

Fast Money on CNBC ran a good explanation, with video, on how we got into our current financial crises. Essentially in 2004 five financial institutions: Morgan Stanley, Goldman Sachs, Bear Stearns , Lehman Brothers, and Merrill Lynch, in a cooperative effort, went before the Securities Exchange Commission to change their leverage requirement from 12:1 to 40:1. Additionally interests rates were low, the firms were given access to cheap money, and instituted lax lending standards.

It was not "regulation" that caused this problem. These companies went to the government for less regulation and were given less regulation. They abused their freedom. Regulations did not force these corporate leaders to "innovate" financial instruments that were toxic. It was the willful actions of the corporate leaders that created this financial mess. Unfortunately, I doubt that any of the corporate leaders who created this financial mess will acknowledge responsibility, will offer an apology, and will refund their excessive pay packages. One could conclude that "responsibility" for ones action is no longer fashionable in the United States.


Here is a YouTube video (9/23/2008) between Larry Kudlow and Senator Bernie Sanders of Vermont. Bernie humorously points out the amazing overnight "conversion" of Larry Kudlow (a free market advocate) to "socialism" now that the free market has failed and these companies need to be bailed out. Enjoy.

9/29/2008 (Update)
Good article at TechDirt: "Take a Deep Breath: Some Perspective on The Financial Crisis".

10/03/2008 (Updated)
New York Times Article: "Agency’s ’04 Rule Let Banks Pile Up New Debt, and Risk"

In "The Borrowers" Ms. McLean writes: "Step back. The securities that are poisoning the financial system are made up of mortgages and home equity lines that are going sour. They may soon consist of sick credit card and automobile debt as well. “Innovation” on Wall Street meant that the institution that made the loans could sell them off, and bankers could carve up those loans into new instruments, which they in turn sold to investors around the globe, with the result being that no one felt responsible for ensuring that the person who got the mortgage or the credit card or the home equity loan could actually pay for it." (Emphasis added)

Monday, September 22, 2008

The Gold Standard

As part of writing my prior post, I read Steve Forbes article How to Cure This Sick System". In that article Steve recommends that "The Fed should declare that its goal for gold is around $500 to $550. That would stabilize the buck ...". I have never approved of the gold standard, but Steve does have an extremely valuable point.

If one looks at the recent rise in commodity prices (such as gold and oil) the question naturally arises as to why these commodities are going up in value? In actuality they are NOT going up, the dollar is going down in value. (My perception, not based on research)

This can also be extrapolated to house values (a type of asset) going up. The value of housing, in very very simplistic terms, has NOT being going up. The value of the dollar has been going down.
(My perception, not based on research)

T. Boone Pickens for example has been pointing out through TV commercials that we export some of out wealth every time we buy a barrel of oil from a foreign source.

Steve writes in his article "
What enabled their taking on so much debt and so many questionable assets was, primarily, the easy-money policy of the Federal Reserve." The availability of cheap credit also allowed many home buyers to pay more for houses that they otherwise could not have afforded.

Additionally, the Federal government is running a budget deficit. Spending money that we have not yet earned and that we currently do not posses promotes inflation.

In essence through the creation of cheap credit, running a budget deficit, and exporting our wealth overseas we are devaluing our currency. This devaluation, since we have a world wide economy, is reflected in perceived increases in the prices of real assets such as houses, gold, and oil. (Of course some increases/decreases in commodity prices can be attributed to global demand)

As a nation we may be rich now. We won't go broke immediately, but if this trend continues we will end up in the poor house when the foreign holders of our debt decide to foreclose.

The Free Market and Responsiblity II

One of the fundamental mantra's of many professed "free market" advocates is "less regulation means growth" The financial institutions were given greater regulatory freedom and they abused this liberty. What is truly amazing is that some of those who chant the mantra of less regulation are now attempting to blame the collapse of our financial institutions on regulation!

Missing from this anti-regulatory chant is an acknowledgment that the freedom to succeeded is also a freedom to fail. If one has freedom, they misuse that freedom, and they consequently fail; they should accept the responsibility of their failure. No one forced the financial institution to make risky bets. They did it to themselves.

Over at the The Technology Liberation Front Hance Haney wrote "But as Steve Forbes points out, the “easy-money” policy of the Federal Reserve helped financial institutions pile up debt and bad assets."

So here we have the Federal reserve opening up the candy store to satiate the corporate demand for cheap money to promote economic growth. Now the financial institutions have a bellyache because they overate. Rather than acknowledge that the "free market", in this situation failed because they lacked self control, apologists are attempting by slight of hand to place the blame on regulation.

This seems to be a very contrary to Libertarian principles. Actually, it sounds like something the Democrats would promote. The Democrats advocate how we have a moral obligation to save the the poor unfortunate homeowners, while failing to acknowledge that the homeowners bought houses they could not afford. It does not make a difference, in term of responsibility, whether it is a corporation or a house. The simple fact is, we have had some irresponsible behavior and everyone is asking for a hand-out. In today's America no one is to blame and we are all entitled to the state saving us. I guess we are on the road to a welfare state.

Monday, September 15, 2008

The Free Market and Responsiblity

Today was a tough day. The meltdown in the financial stocks continued. The stock market fell 504 points. Lehman Brothers and Merrill Lynch went out of business. Previously Bear Sterns and Countrywide also went out of business. These companies went out of business because they were managed irresponsibly.

I am using the word "irresponsibly" because a small segment people who profess to be free market advocates refuse to acknowledge that corporations, if they wish to operate in a regulatory free environment, must behave responsibly. Besides, I don't want to get into the other inflammatory issues such as unrestrained greed.

According to some free market advocates the onus for uncovering corporate misconduct belongs to the consumer and that a magical black box, in the form of "market forces" will somehow cause the offending corporation to mend their ways. This is a simplistic argument for few of us have the expertise and time to fully investigate corporate operations. Even the experts, who are paid full time to monitor companies were unable to detect the severity of the problem. Regretfully, the invisible corrective hand of "market forces" failed the financial sector since these companies did not mend their ways before it was too late. In a real absolutist sense the free market has worked, these companies have gone out of business due to mismanagement. A fairly draconian solution. Now, we as nation have been left to clean up this mess.

An issue currently under debate is Network Neutrality. The uncompromising free market advocates claim that regulations requiring that internet providers deliver the packets in their trust in a neutral manner to the packet's destination will destroy the internet since it will squelch innovation and hinder investment. They assert that internet service providers must have the "flexibility" to manage the flow packets as they see fit. On the other hand, those in favor of Network Neutrality want to be guaranteed that the internet service providers will deliver the packets to their destination in a fair and neutral manner.

My concern with the Net Neutrality Debate is that the word "flexibility" in the corporate environment has degenerated to mean that we (as a corporation) can do whatever we want. The financial institutions are in deep trouble because of their misuse of "flexibility". In terms of the Net Neutrality debate, we are seeing that some companies are abusing their "flexibility". Comcast and AT&T , for example, have already demonstrated, in some cases, that they cannot be trusted. Of particular concern is that in the absence of Network Neutrality guarantees the consumer will have no rights concerning how their packets are delivered. My observation in following the Net Neutrality debate, there are regretfully few calls by commentators for offending corporations to modify deplorable behavior when it is uncovered.

My intent is not to advocate for more regulation. Corporate managers can take steps to avoid regulatory oversight by accepting responsibility to operate their companies in a clear transparent manner. One means of accomplishing this would be the creation of a professional code of conduct. Self regulation, if done properly would avoid the necessity of regulation and would represent a commitment to operate responsibly for the benefit of both the corporation and its customers. The ability to act freely should also mean that one is responsible. The freedom to act "flexibility" in a whimsically self serving manner ultimately leads to failure.

If companies fail to operate ethically, they deserve to be regulated. Unfortunately, the meltdown of our financial institutions is not a positive indicator that corporations, especially on the issue of Network Neutrality, will act ethically .

Revised: September 16, 2008.

Wednesday, September 3, 2008

Quote of the Day

Thanks to William Stepp at Against Monopoly for finding the quote below from John Perry Barlow. This quote was written in 1994!

"The greatest constraint on your future liberties may come not from government but from corporate legal departments laboring to protect by force what can no longer be protected by practical efficiency or general social consent."

John Perry Barlow, "The Economy of Ideas: A Framework for Patents and Copyrights in the Digital Age (Everything You Know About Intellectual Property Is Wrong)," Wired 2.03 (March 1994). This document can be accessed at:

Tuesday, September 2, 2008

Idle Observations on Election Year Tax Rhetoric

Tonight on Kudlow's Money Politic$ Larry had on his show Jason Furman and Steve Forbes. Jason was representing Obama’s proposed tax plan and Steve was representing McKain’s proposed tax plan. Both Jason and Steve Forbes claimed that their proposed tax cuts would help the economy.

Missing from the discussion is the obvious question, how will we balance our National budget? Both parties seem to avoid discussing the “hard” decisions that politicians are supposed to be making to balance the budget. Seems that both Obama and McKain are offering us free circus acts in the hopes that we won't notice that we are spending ourselves into bankruptcy. Fiscal responsibility is an "inconvenient truth".

Another issue discussed, who should pay the taxes? Needless to say Larry and Steve demanded with much empty rhetoric that corporate tax rates be reduced to “foster economic growth”. While this line of reasoning has emotional appeal, this point of view fails the smell test. Assuming a balanced budget, a low corporate tax rate will not foster economic growth as explained below.

Supply side supporters such as Larry and Steve promote the concept that if corporations don’t pay taxes it will foster economic growth since corporations will be able to sell their products at a lower price thereby generating consumer demand. But wait! The supply side supporters are overlooking the critical concept that the consumer would now be forced to pay more in taxes since the corporations aren’t. Logically, if you as a consumer must pay more in taxes you will have less money to spend on products. Therefore the consumer would have less incentive to buy. In reality, with a balanced budget, it does not matter who actually pays the taxes.

Nevertheless, I would advocate that taxes should be paid by the corporation and not by the consumer. Why? Under the capitalistic system corporations are, in theory, competing for your dollars when selling their products. If the consumer is “freed” of the tax burden, the consumer may more appropriately allocate their scarce resource (money) for the products they want.

As a follow-up to the concept of “the products consumers want”, tax policy should not be made on “fostering business” since corporations may be distorting the free market by making products that are profitable for tax reasons rather than economic reasons. (Of course this assumes that corporations will be paying a fair tax and not playing accounting tricks with taxes.) If business can’t compete without a tax crutch (corporate welfare), they have no business being in business.

Tuesday, August 26, 2008

Finally got around to it.

After three years, I finally got around to setting this up. The major benefit of this blog will be my ability to further explore issues of interest. Specifically, issues related to the continued abuse of copyright law and patent law. One of my basic themes will be the refutation of the necessity for "stronger" copyright and patent laws to protect so-called property rights. What is seldom acknowledged publicly is that the end-user of a product when they purchase it acquires a property right to the use of that product. However, the current trend in copyright law and patent law has been the aggrandizement of the so-called right of the product manufacturer to control the product post-sale. This deprives the consumers of their historic property right to use the products as they wish. Or to say this differently, the content producers are continuing to successfully lobby Congress to change the law to their benefit by criminalizing formerly legal uses. This gets into a whole new realm of legal and ethical issues. Enough for now.

Other expected topics would include the environment, science fiction, amateur radio, my masochistic relationship with Microsoft ACCESS, and my extremely slow never ending transition from Windows to LINUX.